Sep 30, 2016 - when it can be used and how DOL will ensure that covered employers comply with the final rule requirement
September 2016
Fact Sheet on the Final Rule on Paid Leave for Workers on Federal Contracts and Subcontracts On Sept. 7, 2015, President Barack Obama signed Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. On Sept. 30, 2016, the Department of Labor published the final rule needed to implement the EO’s requirements. The final rule requires federal construction contractors and subcontractors to provide their employees with up to seven days of paid sick leave annually, including paid leave allowing for family care. The final rule specifies the contracts and employees covered, as well as rules for how sick leave will accrue, when it can be used and how DOL will ensure that covered employers comply with the final rule requirement. The rule will apply to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after Jan. 1, 2017 or that are awarded outside the solicitation process on or after Jan. 1, 2017.
Coverage DOL’s final rule applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after Jan. 1, 2017 (or that are awarded outside the solicitation process on or after Jan. 1, 2017). The final rule applies to four major categories of contractual agreements: 1) Procurement contracts for construction covered by the Davis-Bacon Act. 2) Service contracts covered by the Service Contracts Act. 3) Concessions contracts, including any concessions contracts excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b). 4) Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents or the general public. Furthermore, any subcontract of a covered contract that (like the upper-tier contract) falls into one of these four categories is subject to the paid sick leave requirements.
Procurement Contracts for Construction Any contract covered by the DBA and its implementing regulations is subject to the final rule’s requirements. The final rule does not apply, however, to contracts that are subject only to the Davis-Bacon Related Acts—the laws under which federal agencies provide financial and other assistance to construction projects through grants, loans, guarantees, insurance and other methods, but do not directly procure construction services.
Employees Who Are Entitled to Paid Sick Leave The final rule applies to any person engaged in performing work on or in connection with covered contracts whose wages under such contract are governed by the DBA, SCA or the or Fair Labor Standards Act, including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions. The final rule includes a narrow exemption from the rule’s accrual requirements for employees who perform work duties necessary to the performance of a covered contract (but who are not directly engaged in AMERICAN SUBCONTRACTORS ASSOCIATION, INC. 1004 Duke Street, Alexandria, VA 22314-3588 Phone: (703) 684-3450 Email:
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2 performing the specific work called for by the contract) and who spend less than 20 percent of their hours worked in a particular workweek performing work in connection with such contracts.
Collective Bargaining Agreements If a collective bargaining agreement ratified before Sept. 30, 2016 applies to an employee’s work performed on or in connection with a covered contract, and the CBA provides the employee with at least 56 hours (or 7 days) of paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, the requirements of the final rule will not apply to the employee until the date the agreement terminates or Jan. 1, 2020, whichever is first. If the CBA provides the employee with paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, but the amount provided under the CBA is less than 56 hours (or 7 days), the contractor must provide covered employees with the difference between 56 hours (or 7 days) and the amount provided under the existing CBA in a manner consistent with the EO and Final Rule or the terms and conditions of the CBA.
Contracting Agency Obligations The final rule sets forth the responsibilities of executive departments and agencies that are parties to covered contracts. These contracting agencies are responsible for ensuring that a contract clause setting forth the paid sick leave requirements under the final rule is included in any new contracts or solicitations for contracts covered by the final rule. Contracting agencies are also responsible for withholding funds when a contractor or subcontractor fails to abide by the terms of the applicable contract clause, such as by failing to provide the required paid sick leave, and for forwarding any complaints alleging a contractor’s non-compliance with the final rule to DOL’s Wage and Hour Division.
Accrual of Paid Sick Leave Under the final rule, employees accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. As to employees for whom contractors are not already required to keep records of hours worked pursuant to the DBA, SCA or FLSA (such as employees who are employed in a bona fide executive, administrative, or professional capacity under FLSA regulations), contractors can use the assumption that the employees are working on or in connection with covered contracts for 40 hours each week. Contractors are also permitted to use an estimate of time their employees work in connection with (rather than on) a covered contract as long as the estimate is reasonable and based on verifiable information. The final rule also creates an option for contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue leave based on hours worked. Accrual is calculated, and employees are to be notified in writing of the amount of paid sick leave they have available, at the end of each pay period or each month, whichever interval is shorter.
Maximum Accrual, Carryover, Reinstatement and Payment for Unused Leave The final rule provides that contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next. The final rule also allows contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. Furthermore, contractors are required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired by the same contractor within 12 months after a job separation unless contractors provide payment to employees for accrued, unused paid sick leave upon separation. Contractors are not required to pay employees for accrued, unused paid sick leave at the time of a job separation (“cash-out”); however, if they do provide cash-out, they will not be required to reinstate unused leave.
Use of Paid Sick Leave The final rule explains that an employee may use paid sick leave for an absence resulting from: 1) Physical or mental illness, injury, or medical condition of the employee. 2) Obtaining diagnosis, care or preventive care from a health care provider by the employee.
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3) Caring for the employee’s child, parent, spouse, domestic partner or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship who has any of the conditions or need for diagnosis, care, or preventive care described in (1) or (2). 4) Domestic violence, sexual assault or stalking, if the time absent from work is for the purposes described in (1) or (2) or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (3) in engaging in any of these activities. The final rule provides definitions of these terms. Under the final rule, contractors must allow employees to use paid sick leave in increments as small as one hour (with a narrow exception for employees whose work makes it physically impossible to leave or return to the job during a shift). Contractors may only limit the amount of paid sick leave an employee uses at once or per year on the basis of how much paid sick leave the employee has available. When employees use paid sick leave, contractors must provide them with the same regular pay and benefits they would have received if they had not used the leave, except that they need not earn additional paid sick leave during that time.
Requests to Use Leave Under the final rule, an employee’s request to use paid sick leave may be made orally or in writing. A leave request must be made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable. A contractor is required to communicate any denial of a request to use paid sick leave in writing, with an explanation for the denial—which cannot be based on whether the employee has found a replacement worker or on the contractor’s operational needs.
Certification or Documentation of the Need to Use Leave Under the final rule, a contractor may require certification only for absences of three or more consecutive full days, and the employee must have received notice of the requirement to provide certification or documentation before he or she returns to work. If paid sick leave is used for the physical or mental illness, injury, or medical condition of the employee; obtaining diagnosis, care or preventive care from a health care provider by the employee; or caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity, certification must be issued by a health care provider. If the paid sick leave is used for an absence resulting from domestic violence, sexual assault or stalking, documentation could be from a health care provider, counselor, representative of a victim services organization, attorney, clergy member, family member, or close friend; self-certification is also permitted. Records relating to medical histories are required to be maintained as confidential records, and contractors are prohibited from disclosing any verification information and are required to maintain confidentiality about domestic abuse, sexual assault or stalking, unless the employee consents or when disclosure is required by law.
Interaction with Other Laws and Paid-Time-Off Policies The final rule explains how the paid sick leave requirements interact with contractors’ obligations under other laws. It explains that a contractor may not use paid sick leave required by final rule toward the fulfillment of its DBA or SCA obligations. It also explains that a contractor’s obligations under the final rule have no effect on its obligations to comply with, or ability to act pursuant to, the Family and Medical Leave Act; paid sick leave may be substituted for (that is, may run concurrently with) unpaid FMLA leave, and all notices and certifications that satisfy FMLA requirements will satisfy the request for leave and certification requirements of the final rule. With respect to state or local paid sick time laws, the final rule explains that contractors must comply with both any such law that applies as well as the final rule, but contractors may satisfy their obligations by providing paid sick time that also fulfills the requirements of a state or local law provided that the paid sick time is accrued and may be used in a manner that meets or exceeds all of the requirements of the final rule. Where the requirements of an applicable state or local law and the final rule differ, satisfying both will require a contractor to comply with the requirement that is more generous to employees. The final rule also explains that a contractor’s existing PTO policy can fulfill the paid sick leave requirements of the final rule as long as it provides employees with at least the same rights and benefits as the final rule requires. In other words, if a contractor provides 56 hours of PTO that meets the requirements described in the
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final rule but employees can use the leave for any purpose, the contractor does not have to provide separate paid sick leave even if an employee uses all of the time for vacation. The final rule also addresses PTO policies that provide more than 56 hours of leave: a contractor may choose to either (1) provide all PTO used for the purposes described in the final rule in compliance with all of the rule’s requirements, or (2) track, and make and maintain records reflecting, the amount of paid time off an employee uses for the purposes described in the rule, in which case the contractor need only provide, for each accrual year, up to 56 hours of PTO the employee requests to use for such purposes that complies with the rule’s requirements, such as for certification, documentation and recordkeeping.
Multiemployer Plans The final rule also permits a contractor to fulfill its obligations under the rule jointly with other contractors who make contributions to a multiemployer plan (maintained pursuant to one or more CBAs) on behalf of employees who receive access to paid sick leave that complies with the final rule.
Enforcement Procedures Under the final rule, complaints may be filed with DOL’s Wage and Hour Division by any person or entity that believes a violation of the final rule has occurred. The final rule contains a mechanism for WHD investigations and informal complaint resolution, as appropriate. It also specifies remedies and sanctions for violations of the final rule, including the payment of damages and debarment. The final rule also includes an administrative process, including administrative hearings, to resolve disputes of fact or law.
